(Adds Friday hearing in U.S. court)
By Hugh Bronstein
BUENOS AIRES, June 26 Argentina has deposited
the next payment needed to avoid a default on its restructured
bonds, but a U.S. federal court decided on Thursday not to let
the payment go through.
Both actions increased the stakes in a 12-year legal chess
game between Argentina and creditors who refused to accept the
downgraded terms offered by the country's 2005 and 2010 debt
restructurings and are suing for full repayment.
Argentina will have the month of July to negotiate with its
holdout creditors before falling into technical default. The
next payment is due on Monday, but with that payment blocked by
the courts, Buenos Aires will have a 30-day grace period to
strike a deal with the holdouts.
If it fails, Latin America's No. 3 economy would be pushed
into another painful default at the end of next month.
Economy Minister Axel Kicillof said Argentina owes an $832
million coupon payment on restructured bonds on Monday.
"Of that total, $539 million was deposited in the accounts
... of the Bank of New York Mellon at the Central Bank of
Argentina," Kicillof said, adding that the rest of the $832
million had been deposited by way of other financial
"We affirm our commitment to honor our debt to all
creditors," he said.
In order to pay holders of the country's restructured bonds,
Argentina needed a stay to be issued by U.S. District Judge
Thomas Griesa in New York because he had ordered earlier that
Argentina was not to make payments without paying the holdouts
at the same time.
Griesa denied Argentina's stay request about an hour after
Kicillof said the deposit had been made.
Griesa scheduled a hearing for 10:30 a.m. EDT (1430 GMT) on
Friday after getting a letter from the holdouts referencing the
deposit and asking him to "address this violation of this
Griesa has ordered Argentina to pay the holdouts $1.33
billion plus accrued interest, at the same time it pays the 93
percent of bondholders who accepted the 2005 and 2010
restructurings. Argentina has said it cannot afford to pay so
much to the holdouts and asked Griesa for a stay on that order,
which would have allowed Monday's coupon payment to go through.
Argentina's debt servicing costs are set to more than double
in 2015 as it's economy stagnates, inflation soars at about 30
percent and foreign reserves slide to critically low levels.
Central bank reserves, which fell 30 percent last year and
stand at eight-year lows of about $29 billion, are seen falling
in the second half of 2014 after Argentina's main farm exports,
soy and corn, are harvested and sold.
But Argentina's financial markets slipped only slightly on
the news of Griesa's rejection, as investors bet that the
country would use the 30-day grace period to strike a deal with
The restructured bonds, stemming from Argentina's $100
billion 2002 default, offer less than a third of the original
value of the debt. The holdouts have sued in the U.S. courts to
be repaid 100 cents on the dollar.
The debt drama is being played out in New York this week,
where Griesa's order includes an injunction against Bank of New
York Mellon and other payment agents from transferring money
from Argentina to its restructured bondholders.
Also in Manhattan, lawyers for the holdouts and Argentina
raced against the clock to clinch a deal for settling the 7
percent of defaulted bonds that were not restructured.
Griesa appointed a mediator to oversee the talks.
(Additional reporting by Eliana Raszewski, Alexandra Ulmer and
Jorge Otaola in Buenos Aires and Baniel Bases and Nate Raymond
in New York; Editing by James Dalgleish, Leslie Adler, Tom
Brown, Toni Reinhold)